Answer:
Warranty repair Expense (Dr.) $200
Warranty Payable (Dr.) $200
Explanation:
The warranty expense is the estimate of probable expense that will incur due to fault in the product. The estimated repair is the 4% of skates sold. If 500 pairs of skates are sold then out of them 4% will require repair. The repair for the faulty skates will cost $10. The total cost will be $200,
500 pairs of skates * 4% * $10
At an output level of 53,000 units, you calculate that the degree of operating leverage is 3.21. If output rises to 57,000 units, what will the percentage change in operating cash flow be? Suppose fixed costs are $175,000. What is the operating cash flow at 46,000 units? The degree of operating leverage? that the degree of operating
Answer:
If output rises to 57,000 units, what will the percentage change in operating cash flow be?
24.23%What is the operating cash flow at 46,000 units?
$45,613.84The degree of operating leverage (at 46,000 units)?
4.84Explanation:
degree of operating leverage = [quantity x (price - variable costs)] / {[quantity x (price - variable costs)] - fixed costs}
degree of operating leverage x {[quantity x (price - variable costs)] - fixed costs} = [quantity x (price - variable costs)]
3.21 x {[53000 x (contribution margin)] - fixed costs} = [53000 x (contribution margin)]
(3.21 x 53000 x contribution margin) - (3.21 x 175000) = 53000 x contribution margin
let C = contribution margin
170130C - 561750 = 53000C
117130C = 561750
C = 561750 / 117130 = 4.795953
operating cash flow (at 53,000) = (53,000 x $4.795953) - $175,000 = $79,185.52
operating cash flow (at 57,000) = (57,000 x $4.795953) - $175,000 = $98,369.32
% change = ($98,369.32 - $79,185.52) / $79,185.52 = 24.23%
operating cash flow (at 46,000) = (46,000 x $4.795953) - $175,000 = $45,613.84
% change in operating cash flows = ($45,613.84 - $79,185.52) / $79,185.52 = -43.4%
% change in sales = (46,000 - 53,000) / 53,000 = -13.21
degree of operating leverage = $220,613.84 / $45,613.74 = 4.84
A firm pays a current dividend of $1.00 which is expected to grow at a rate of 5% indefinitely. If current value of the firm’s shares is $35.00, what is the required return based on the constant growth dividend discount model (DDM)?
Answer:
8%
Explanation:
A firm pays a current dividend of $1
The growth rate is 5%
= 5/100
= 0.05
The current value of the firm's share is $35
Therefore, the required return using the constant growth discount dividend model can be calculated as follows
K = 1×(1+0.05)/35 + 0.05
K= 1×1.05/35 + 0.05
= 1×0.03 + 0.05
= 0.03 + 0.05
= 0.08×100
= 8%
Hence the required return is 8%
Indigo Corporation had the following tax information.
Year Taxable Income Tax Rate Taxes Paid
2015 $294,000 35% $102,900
2016 332,000 30% 99,600
2017 399,000 30% 119,700
In 2018, Indigo suffered a net operating loss of $487,000, which it elected to carry back. The 2018 enacted tax rate is 26%.
Prepare Indigo’s entry to record the effect of the loss carryback.
Account titles Debit Credit
Answer:
Explanation:
Given that:
Indigo Corporation had the following tax information.
Year Taxable Income Tax Rate Taxes Paid
2015 $294,000 35% $102,900
2016 332,000 30% 99,600
2017 399,000 30% 119,700
In 2018, Indigo suffered a net operating loss of $487,000, which it elected to carry back. The 2018 enacted tax rate is 26%.
The objective is to prepare the Indigo's entry to record the effect of the loss carryback.
The Income Tax Refund Receivable = Taxable income(2018) × Tax rate(2018) + ( net operating loss - Taxable income(2018) ) × Tax rate(2018)
(332000 × 30%)+(476000-332000) × 30%
The Income Tax Refund Receivable = (332000 × 0.30)+(476000-332000) × 0.30
The Income Tax Refund Receivable = 99600 + 144000× 0.30
The Income Tax Refund Receivable = 99600 + 43200
The Income Tax Refund Receivable = 142800
Therefore, Indigo Corporation ENtry can be prepared as follows:
Account titles Debit Credit
Income Tax Refund Receivable 142800
Benefit Due to Loss Carryback 142800
To record the effect of the loss carryback
A 60-year old retiree is in a very low tax bracket. He has a low risk tolerance and wishes to make an investment that will provide income. Which is the BEST recommendation
Complete Question:
A 60-year old retiree is in a very low tax bracket. He has a low risk tolerance and wishes to make an investment that will provide income. Which is the BEST recommendation?
Group of answer choices.
A. Mid-cap common stock
B. Municipal bond
C. Bank CD
D. Treasure STRIPS
Answer:
C. Bank CD
Explanation:
In this scenario, a 60-year old retiree is in a very low tax bracket. He has a low risk tolerance and wishes to make an investment that will provide income. A Bank certificate of deposit (CD) is the best recommendation.
A bank certificate of deposit (CD) can be defined as a secured form of time-bound deposit and a special low-risk savings account, wherein money (lump-sum) are left with the bank for a specific period of time in exchange for an interest rate premium.
Generally, a certificate of deposit pays a higher interest rate to its holder than the regular savings account because the banks invest the money in a business.
Additionally, the bank certificate of deposit is protected and insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000.
Elite Apparel Inc. is considering two investment projects. The estimated net cash flows from each project are as follows:
Year Plant Expansion Retail Store Expansion
1 $ 450,000 $ 500,000
2 450,000 400,000
3 340,000 350,000
4 280,000 250,000
5 180,000 200,000
Total $1,700,000 $1,700,000
Each project requires an investment of $900,000. A rate of 15% has been selected for the net present value analysis.
Present Value of $1 at Compound Interest
Year 6% 10% 12% 15% 20%
1 0.943 0.909 0.893 0.870 0.833
2 0.890 0.826 0.797 0.756 0.694
3 0.840 0.751 0.712 0.658 0.579
4 0.792 0.683 0.636 0.572 0.482
5 0.747 0.621 0.567 0.497 0.402
6 0.705 0.564 0.507 0.432 0.335
7 0.665 0.513 0.452 0.376 0.279
8 0.627 0.467 0.404 0.327 0.233
9 0.592 0.424 0.361 0.284 0.194
10 0.558 0.386 0.322 0.247 0.162
Required:
1a. Compute the cash payback period for each project.
Cash Payback Period
Plant Expansion < >1 year2 years3 years4 years5 years
Retail Store Expansion < >1 year2 years3 years4 years5 years
1b. Compute the net present value. Use the present value of $1 table above. If required, round to the nearest dollar.
Plant Expansion Retail Store Expansion
Present value of net cash flow total $ $
Less amount to be invested $ $
Net present value $ $
2. Because of the timing of the receipt of the net cash flows, the
plant expansion
retail store expansion
Answer:
the cash payback period for both projects is 2 years
NPV for plant expansion = $304,707.24
NPV for Retail Store Expansion = $309,744.41
retail store expansion has the greater NPV
Explanation:
Here is the full question for question 2
. Because of the timing of the receipt of the net cash flows, the
plant expansion
retail store expansion
has the higher net present value
Payback calculates the amount of time it takes to recover the amount invested in a project from it cumulative cash flows
Please check the attached image for a calculation of how the payback period was calculated.
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
for Plant Expansion
Cash flow in year 0 = -900,000
Cash flow in year 1 = 450,000
Cash flow in year 2 = 450,000
Cash flow in year 3 = 340,000
Cash flow in year 4 = 280,000
Cash flow in year 5 = 180,000
I = 15%
NPV = $304,707.24
For retail store expansion
Cash flow in year 0 = -900,000
Cash flow in year 1 = 500,000
Cash flow in year 2 = 400,000
Cash flow in year 3 = 350,000
Cash flow in year 4 = 250,000
Cash flow in year 5 = 200,000
I = 15%
NPV = $309,744.41
retail store expansion has the greater NPV
To find the NPV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
The following is a list of costs that were incurred in the production and sale of large commercial airplanes:
a. Salary of chief compliance officer of company
b. Power used by painting equipment
c. Instrument panel installed in the airplane cockpit
d. Annual bonus paid to the chief operating officer of the company
e. Turbo-charged airplane engine
f. Interior trim material used throughout the airplane cabin
g. Cost of normal scrap from production of airplane body
h. Hourly wages of employees that assemble the airplane
i. Salary of the marketing department personnel
j. Cost of paving the headquarters employee parking lot
k. Cost of electrical wiring throughout the airplane
l. Cost of electronic guidance system installed in the airplane cockpit
m. Salary of plant manager
n. Cost of miniature replicas of the airplane used to promote and market the airplane
o. Human resources department costs for the year
p. Metal used for producing the airplane body
q. Annual fee to a celebrity to promote the aircraft
r. Hydraulic pumps used in the airplane’s flight control system
s. Yearly cost of the maintenance contract for robotic equipment
t. Prebuilt leather seats installed in the first-class cabin
u. Depreciation on factory equipment
v. Special advertising campaign in Aviation Worldmagazine
w. Oil to lubricate factory equipment
x. Masks for use by painters in painting the airplane body
y. Decals for cockpit door, the cost of which is immaterial to the cost of the final product
z. Salary of chief financial officer
Required:
a. Classify each cost as either a product cost or a period cost.
b. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost.
c. Indicate whether each period cost is a selling expense or an administrative expense.
Answer:
Correct Answer:
PRODUCT COST:
The following falls under direct material cost:
b. Power used by painting equipment
c. Instrument panel installed in the airplane cockpit
e. Turbo-charged airplane engine
f. Interior trim material used throughout the airplane cabin
l. Cost of electronic guidance system installed in the airplane cockpit.
p. Metal used for producing the airplane body
r. Hydraulic pumps used in the airplane’s flight control system
The following falls under direct labour cost:
j. Cost of paving the headquarters employee parking lot
t. Pre-built leather seats installed in the first-class cabin
y. Decals for cockpit door, the cost of which is immaterial to the cost of the final product
The following falls under factory overhead cost:
u. Depreciation on factory equipment.
PERIOD COST:
The following falls under selling expenses:
g. Cost of normal scrap from production of airplane body
h. Hourly wages of employees that assemble the airplane
i. Salary of the marketing department personnel
m. Salary of plant manager
n. Cost of miniature replicas of the airplane used to promote and market the airplane
o. Human resources department costs for the year
q. Annual fee to a celebrity to promote the aircraft
w. Oil to lubricate factory equipment
x. Masks for use by painters in painting the airplane body
z. Salary of chief financial officer
The following falls under an administrative expenses:
a. Salary of chief compliance officer of company
d. Annual bonus paid to the chief operating officer of the company
s. Yearly cost of the maintenance contract for robotic equipment
v. Special advertising campaign in Aviation Worldmagazine.
Explanation:
Metals and energy currency futures contracts are actively traded on Group of answer choices propane. gold. All of the options are correct. gold and silver. silver.
Answer: All of the options are correct.
Explanation:
Futures refer to a Derivative Instrument contract that mandates a person to buy an asset (underlying asset) at a future date and at a certain price. This enables the buyer of the contract to be certain of an asset's price in future thereby getting rid of various risks.
Metal futures are mostly traded on gold, silver, and copper and energy futures are traded on energy resources like oil and natural usable gas like Propane which is used for most gas related appliances in the household such as cooking gas.
Which of the following stocks is less risky? Stock Average Return Standard Deviation Coefficient of Variation X 10% 40% 4 Y 20% 40% 2
Answer:
Stock X has a CV of 4 while Stock Y has a CV of 2. As stock Y has a lower CV than Stock X, it is less riskier.
Explanation:
The coefficient of variation is a statistical model which is also used to determine the volatility per unit of a factor. In terms of a stock, the coefficient of variation calculates the volatility of its return. It is calculated by dividing the stock's standard deviation, which is a measure of risk, by the stock's mean return or expected return.
CV = SD / r
Where,
CV is coefficient of variationSD is standard deviationr is expected returnThe CV of a stock tells us the risk per unit of return. The higher the CV, the riskier the stock and vice versa.
Stock X has a CV of 4 while Stock Y has a CV of 2. As stock Y has a lower CV than Stock X, it is less riskier.
"At that time, the market price of ABC is $44. If the market rises to $58 and the call is exercised (the put expires out the money), the gain or loss is:"
Answer:
600 loss
Explanation:
The computation of the gain or loss is shown below:
Since on Jan, there is a put option of 45 at $3 and the market rises to $58
So it losses by 13 points i.e
= 45 - 58
= 13
Now the total premium points collected is of 7 i.e
= 4 + 3
= 7
So, the remaining points left is
= 13 - 7
= 6
So for 6 points, the net loss is $600
"If Jason receives his quarterly bonus of $3,000 and spends $2,100 on a computer and puts the rest in his savings account, what is Jason’s MPC and MPS?"
Answer: 0.70; 0.30
Explanation:
Marginal propensity to consume(MPC) is the additional spending by an economic agent due to a rise in income while the marginal propensity to save is the additional saving by someone due to rise in income.
Increase in income = $3,000
Increase in spending = $2,100
Increase in savings = $3,000 - $2,100 = $900
MPC = $2,100/$3,000
= 0.70
MPS = $900/$3,000
= 0.30
MNM Foods Inc. manufactures jellies that are made out of gelatin in various fruit flavors. However, its sales dipped significantly in the last quarter. Research reveals that a significant amount of health benefits can be associated with the consumption of jellies. MNM Foods incorporates new promotion strategies to project the newly discovered health benefits. This is an example of:
Answer:
Product improvement
Explanation:
Product improvement is the process by which changes in products that attracts new customers or adds benefits for existing customers.
Companies can either add new product features or improve on existing features.
In this instance MNM Foods Inc. jellies sales dipped significantly in the last quarter. To increase sales they incorporated new promotion strategies to project the newly discovered health benefits.
This is a product improvement strategy that highlights health benefits of jellies to consumers.
Suver Corporation has a standard costing system. The following data are available for June: Actual quantity of direct materials purchased 24,000 pounds Standard price of direct materials $ 6.00 per pound Material price variance $ 6,000 Unfavorable Material quantity variance $ 2,400 Favorable The actual price per pound of direct materials purchased in June was:
Answer:
$6.25
Explanation:
Given the data below from the above information,
The actual quantity of direct materials purchased 24,000 pounds
Standard price of direct materials price $6 per pound
Material price variance unfavorable -$6,000
Material quantity variance $2,400
Therefore;
Direct material price Variance = (Standard price - Actual price) × Actual quantity
- $6,000 = ($6 - Actual price ) × 24,000
-$6,000 = $144,000 - 24,000 AP
24,000 AP = $144,000 + $6,000
24,000 AP = $150,000
AP = $6.25
A product selling in France has a price to the channel of EUR 10.00, fixed costs of EUR 33 million, and variable costs of EUR 4.50. How many units does the company have to sell to break even
Answer:
Break-even point in units= 6,000,000
Explanation:
Giving the following information:
Selling price= $10
Unitary variable cost= $4.5
Fixed costs= 33,000,000
To calculate the break-even point in units, we need to use the following formula:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 33,000,000 / (10 - 4.5)
Break-even point in units= 6,000,000
o What types of human resource issues should management be aware of and sensitive to when making this change in distribution methods
Answer:
Management should be aware of and sensitive to the reaction of outstanding employees who relate directly to the former distribution methods.
Explanation:
When the company changes in distribution methods, the employees who relate and gets benefits directly to the former would react negatively. They are afraid of their own dismissal or income reduction. Some may react extremely which results in damages for the company. Hence, the company should work on internal communications to all employees before officially making the change.
Imagine that you are the supply chain manager for the Magic Widget company and you need to measure your supply chain performance. The chart shows the financial variables that you will need to perform your task.
Financial Variables
Total Assets (in $ billions) 15.1
Cost of Goods Sold (in $ billions) 14.3
Inventory:
Raw Material Inventory (in $ billions) 0.76
Work-in-progress Inventory (in $ billions) 0.12
Finished Goods Inventory (in $ billions) 0.82
Compute the percentage of assets committed to inventory and inventory turnover.
Answer:
Percentage of assets in inventory = 11.26%
Inventory turnover = 8.41 times
Explanation:
The computation of the percentage of assets committed to inventory and inventory turnover is shown below:-
Total inventory = Raw material + Work in progress + Finished goods inventory
= $0.76 billion + $0.12 billion + $0.82 billion
= $1.7 billion
Percentage of assets in inventory = Total inventory ÷ Total assets
= $1.7 ÷ $15.1
= 11.26%
Inventory turnover = Cost of goods sold ÷ Total inventory
= $14.3 ÷ $1.7
= 8.41 times
If you were to start a business delivering documents, you might need to purchase cell phones, bicycles, desks, and chairs. a. These purchases are called capital investment. If you raise the funds to purchase them from others you are a saver. b. These purchases are called capital investment. If you raise the funds to purchase them from others you are a borrower. c. These purchases are called consumption. If you raise the funds to purchase them from others you are a saver. d. These purchases are called consumption. If you raise the funds to purchase them from others you are a borrower.
Answer:
The answer is B.
Explanation:
Capital is what is used to start a business. It is what the owner's contribution in the business. In advanced class, it is called stock or equity. Capital is usually from the owner's savings. But if this money is borrowed either from an individual or a bank, the person is a borrower while the other party is the lender.
Option A is incorrect because money raised from someone makes the person borrowing a borrower and not a saver.
Option C and D are incorrect because the items needed for the business are not consumables, they are needed for the smooth running of the business, hence they are not consumption.
Waterway has a standard of 2 hours of labor per unit, at $12 per hour. In producing 3800 units, Waterway used 7350 hours of labor at a total cost of $89670. Waterway's labor quantity variance is
Answer:
Direct labor time (efficiency) variance= $3,000 favorable
Explanation:
Giving the following information:
Standard= 2 hours of labor per unit, at $12 per hour.
In producing 3800 units, Waterway used 7350 hours of labor.
To calculate the direct labor quantity variance, we need to use the following formula:
Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate
Standard quantity= 2*3,800= 7,600 hours
Direct labor time (efficiency) variance= (7,600 - 7,350)*12
Direct labor time (efficiency) variance= $3,000 favorable
In October, Vaughn Company reports 21,200 actual direct labor hours, and it incurs $118,830 of manufacturing overhead costs. Standard hours allowed for the work done is 23,300 hours. The predetermined overhead rate is $4.95 per direct labor hour. Compute the total overhead variance.
Answer:
The answer is $3,495F
Explanation:
The formula for computing total overhead variance is:
Actual overhead - overhead applied.
Overhead applied = overhead rate x standard hours allowed for the workdone.
$4.95 x 23,300 hours
=$115,335
Actual overhead is $118,830
Therefore, we have:
$118,830 - $115,335
= $3,495F
The F in the answer means favourable. The actual overhead incurred is greater than the overhead absorbed.
Cara Industries incurred the following costs for 50,000 units:
Variable costs $90,000
Fixed costs 120,000
Cara has received a special order from a foreign company for 5,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $4,250 for shipping.
If Cara wants to break even on the order, what should the unit sales price be?
A. $4.2
B. $5.05
C.$1.8
D. $2.65
Answer:
Selling price= $2.65
Explanation:
Because it is a special offer, and there is unused capacity, we will take into account only the incremental fixed costs.
First, we need to calculate the unitary variable cost:
Unitary variable cost= 90,000/50,000= $1.8
Now, we can determine the total unitary cost and the selling price per unit:
Total unitary cost= (4,250/5,000) + 1.8= $2.65
Selling price= $2.65
Kingbird Itzek manufactures and sells homemade wine, and he wants to develop a standard cost per gallon. The following are required for production of a 50-gallon batch. 3,360 ounces of grape concentrate at $0.02 per ounce 54 pounds of granulated sugar at $0.55 per pound 60 lemons at $0.90 each 150 yeast tablets at $0.26 each 250 nutrient tablets at $0.14 each 2,400 ounces of water at $0.005 per ounce Kingbird estimates that 4% of the grape concentrate is wasted, 10% of the sugar is lost, and 25% of the lemons cannot be used. Compute the standard cost of the ingredients for one gallon of wine. (Round intermediate calculations and final answer to 2 decimal places, e.g. 1.25.)
Answer:
$5.272
Explanation:
The computation of the standard cost of the ingredients for one gallon of wine is shown below:-
But before that we need to do the following calculations
3,360 ounces of grape concentrate at $0.02 per ounce is (Considering 4%)
= 3,360 × $0.02 ÷ 96%
= $70
54 pounds of granulated sugar at $0.55 per pound is (Considering 10%)
= 54 × $0.55 ÷ 90%
= $33
60 lemons at $0.90 each is (Considering 25%)
= 60 × $0.90 ÷ 75%
= $72
150 yeast tablets at $0.26 each is
= 160 × $0.26
= $41.6
250 nutrient tablets at $0.14 each is
= 250 × $0.14
= $35
2,400 ounces of water at $0.005 per ounce is
= 2,400 × $0.005
= $12
Therefore 50 gallon cost is = $70 + $33 + $72 + $41.6 + $35 + $12
= $263.6
So, cost per gallon = $263.6 ÷ 50
= $5.272
Members of the board of directors of have received the following operating income data for the year just ended:
Safety Step Income Statement For the Year Ended May 31, 2018,
Product Line
Industrial Household
Systems Systems Total
Net Sales Revenue $310,000 $330,000 640,000
Cost of Goods Sold
Variable 33,000 48,000 81,000
Fixed 230,000 68,000 298,000
Total Cost of Goods Sold 263,000 116,000 379,000
Gross Profit 47,000 214,000 261,000
Selling and Administrative Expenses
Variable 68,000 72,000 140,000
Fixed 43,000 28,000 71,000
Total Selling and Administrative Expenses 111,000 100,000 211,000
Operating Income (Loss) $(64,000) $114,000 $50,000
Members of the board are surprised that the industrial systems product line is losing money. They commission a study to determine whether the company should discontinue the line. Company accountants estimate that dropping industrial systems will decrease the fixed cost of goods sold by $82,000 and decrease fixed selling and administrative expenses by $15,000.
Required:
a. Prepare a differential analysis to show whether Safety Step should drop the industrial systems product line.
b. Prepare contribution margin income statements to show Safety Step's total operating income under the two alternatives: (a) with the industrial systems line and (b) without the line. Compare the difference between the two alternatives' income numbers to your answer to Requirement 1.
c. What have you learned from the comparison in Requirement 2?
Answer:
a) with industrial without industrial differential
systems systems amount
sales revenue 640,000 330,000 (310,000)
variable COGS (81,000) (48,000) 33,000
fixed COGS (298,000) (216,000) 82,000
gross profit 261,000 66,000 (195,000)
variable S&A (140,000) (72,000) 68,000
fixed S&A (71,000) (56,000) 15,000
operating 50,000 (62,000) (112,000)
income
b) contribution margin income statements:
with industrial systems
Sales revenue $640,000
- Variable COGS ($81,000)
- Variable S&A ($140,000)
Contribution margin $419,000
- Fixed COGS ($298,000)
- Fixed S&A ($71,000)
Operating income $50,000
without industrial systems
Sales revenue $330,000
- Variable COGS ($48,000)
- Variable S&A ($72,000)
Contribution margin $210,000
- Fixed COGS ($216,000)
- Fixed S&A ($56,000)
Operating loss ($62,000)
c) sometimes certain product lines help to amortize fixed costs and even though they are not profitable by themselves, without them, the company's operating profits and net income could be negatively affected.
Take a real business activity example and relate with the concept of commission depreciation and simple and compound interest rate?
Answer & Explanation: Commission: This is a percentage earned on total sales. Using a health insurance company as an example, brokers earn commission on premium received by the company.
Depreciation: This relates to the wear and tear of an asset. The health insurance company fixed assets such as motor vehicle, furniture and equipments will be depreciated and expensed periodically.
Simple and compound interest rates: Simple interest rate is a rate charged directly on the principal amount deposited. If the health insurance company decides to invest in fixed income or call deposits with a bank for a period of 1 year. The bank can put a specific rate that will be paid to the company as an interest earned.
Compound interest rate on the other hand is beneficial to the financier. It is a rate charged on both the principal amount and the interest earned. For instance if the company decides to take a loan with the bank, the bank can charge a compound interest rate.
Marston Manufacturing Company has two divisions, L and H. Division L is the company’s low-risk division and would have a weighted average cost of capital of 8% if it was operated as an independent company. Division H is the company’s high-risk division and would have a weighted average cost of capital of 14% if it was operated as an independent company. Because the two divisions are the same size, the company has a composite weighted average cost of capital of 11%. Division H is considering a project with an expected return of 12%. Should Marston Manufacturing Company accept or reject the project? Reject the project Accept the project On what grounds do you base your accept–reject decision? Division H’s project should be accepted, as its return is greater than the risk-based cost of capital for the division. Division H’s project should be rejected since its return is less than the risk-based cost of capital for the division.
Answer:
Should Marston Manufacturing Company accept or reject the project?
Marston C Company should reject the project because its expected return is lower than Division H's cost of capital.
Since the divisions' risk is so different, and probably their projects are also very different, the company should use different costs of capital to accept of reject the projects based on each division's cost of capital.
Imagine another situation where Division L is evaluating a project that yields 10%. If they used the company's WACC, then they should reject the project, but if they used the division's cost of capital, then they should accept the project (in this case I would recommend accepting it).
Explanation:
Division H's risk = 14%
Division L's risk = 8%
WACC = 11%
While making purchase decisions, which of the following products is most likely to elicit the greatest reference group influence?
A) A car.
B) A medicine.
C) An award-winning novel.
D) A toothbrush.
Answer: a car
Explanation:
While making purchase decisions, the product that is most likely to elicit the greatest reference group influence will be a car.
This because when an individual has a car, other people see the person and use that as a reference group. It should also be noted that a good thatbis considered public good has a strong influence group.
While making purchase decisions, the product that is most likely to elicit the greatest reference group influence is A) A car.
What is a reference group?A reference group is a group that can influence an individual's buying preferences.
The influence wielded by a reference group depends on the level of conformity within the group.
Thus, while making purchase decisions, the product that is most likely to elicit the greatest reference group influence is A) A car.
Learn more about reference groups in consumer behavior at https://brainly.com/question/13362488
Maurer, Inc., has an odd dividend policy. The company has just paid a dividend of $2 per share and has announced that it will increase the dividend by $6 per share for each of the next five years, and then never pay another dividend. If you require a return of 12 percent on the company’s stock, how much will you pay for a share today
Answer:
The maximum that should be paid for the stock today is $67.22
Explanation:
To calculate the price of the stock today, we will use the discounted cash flow or the DDM approach. The approach bases the value of the stock on the present value of the expected future cash flows from the stock. The cash flows in terms of stock are the dividend payments made by the stock. The formula to calculate the price or present value today under this approach is,
P0 = D1 / (1+r) + D2 / (1+r)^2 + ... + Dn / (1+r)^n
Where,
D1,D2,... are the dividends expected from the stock in year 1, year 2 and so on.r is the required rate of returnP0 = (2+6) / (1+0.12) + (2+6+6) / (1+0.12)^2 + (2+6+6+6) / (1+0.12)^3 +
(2+6+6+6+6) / (1+0.12)^4 + (2+6+6+6+6+6) / (1+0.12)^5
P0 = $67.22
BangBang Percussion Company tried to implement a flextime system. However, after only a few months, they abandoned the new system. Which of the following is the most likely reason BangBang would drop its flextime plan?
A. The employees resented being required to come to work early or stay late.
B. It caused an increase in traffic congestion.
C. Workers tend to be less productive when they have to work longer hours in a single day.
D. It often made communication among employees more difficult.
Answer: It often made communication among employees more difficult.
Explanation:
Flextime is a way of redesigning the traditional work schedules in such a way that the workers will work at the hours that's convenient for them and flexible rather than working based on normal office schedule or timing.
The most likely reason BangBang would drop its flextime plan is when communication among employees becomes difficult.
A random selection from a deck of cards selects
one card. What is the probability of selecting a spade?
0.050
Correct Answer
0.250
0.077
You Answered
0.025
Answer: 0.250
Explanation:
There are 52 cards in a deck of cards. Out of this there are 13 Spades. The probability of picking a spade at random is therefore;
= 13/52
= 0.250
You bought a stock one year ago for $49.52 per share and sold it today for $57.04 per share. It paid a $1.14 per share dividend today. How much of the return came from dividend yield and how much came from capital gain?
Answer:
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Assume the Residential Division of KappyKappy Faucets had the following results last year:
Net sales $6,360,000
Operating income 636,000
Average total assets 5,300,000
Management's target rate of return 16%
What is the division's return on investment?
Answer:
12%
Explanation:
Calculation for the division's return on investment
Using this formula
Return On Investment = Operating income /Average total assets
Let plug in the formula
Return on investment= $636,000/$5,300,000
Return on investment= 0.12*100
Return on investment=12%
Therefore the division's return on investment will be $12%
"Frank bought a house for $100,000. He put 20% down and borrowed the rest from the bank. However, the value of the house has now increased to $160,000 and he has paid off $20,000 of the bank loan. What is the equity that Frank has in his home
Answer:
$100,000
Explanation:
The computation of the equity in his home is shown below;
Given that
Increased in the value of the house = $160,000
And, the amount he has to paid is
= Borrowed amount - down payment
= $80,000 - ($100,000 × 20%)
= $80,000 - $20,000
= $60,000
So, the equity is
= $160,000 - $60,000
= $100,000
hence, the equity value is $100,000
Answer:
The equity that Frank has in his home is $100000
Explanation:
The purchase price of house = $100000
The down payment = 20% or $100000 ×20% = $20000
The remaining amount paid by bank = $80000
The increased value of house = $160,000
Payment of loan amount = $20000
The Value of house is $160000 and he pays $20000 to the bank as a part of loan payment so reaming amount that he has to pay the bank is ($80000-20000) = $60000.
Thus, his equity will be $100000.
